Daily Independent (Ashland, KY)

June 28, 2013

Kentucky Power seeks large increase in rates

Tim Preston
The Independent

FRANKFORT — Officials at Kentucky Power have announced plans to file a base rate case with state public utility officials to seek a significant rate increase to pay for the costs associated with a partial transfer of ownership at the Mitchell Power Plant near Moundsville, W.Va., and “retirement” of the Big Sandy No. 2 power plant in Louisa.

State Rep. Rocky Adkins responded with a statement condemning the power company’s request.

The proposal, which could be essentially negated pending the results of two other pending decisions, would boost residential customers’ bills by almost a third.

“While the overall impact on revenue is approximately 23 percent, the impact on residential customers will be approximately 31 percent due to the way revenues are allocated among customer classes based on usage, service charges and other factors,” according to a statement released by Kentucky Power, which is a subsidiary of American Electric Power (AEP), which also owns the Mitchell Power Plant. “There are two mitigation measures in the filing that could effectively lessen the overall rate impact from 23 percent to 12 percent and the residential impact from approximately 31 percent to about 20 percent.”

The two factors cited are an anticipated additional revenue from operation of Big Sandy No. 2 and the Mitchell plant during an “overlap” period until the plant in Louisa is taken offline, as well as “favorable fuel costs to flow through to customers resulting from cheaper coal used to operate the Mitchell Power Plant,” according to the release.

If approved, the proposal would elevate a $119.69 monthly residential bill to $156.93, according to Kentucky Power’s statement.

Adkins said he sent a letter to the Public Service Commission expressing his displeasure with the power company’s plans.

“I was astonished that the Kentucky Power Company has filed a motion against Lawrence County intervening in the shutting down of the Big Sandy Power Plant,” he said.

Adkins state in his letter, “Today the Kentucky Power Company issued a release that they would request a base rate increase tomorrow — which could be as high as 31 percent for residential customers — to cover costs of transferring power from West Virginia’s Mitchell plant to Big Sandy. This action validates what I’ve been saying all along, which is that Kentucky Power would file another rate case this summer to increase residential utility bills as much as 31 percent. I said it at the hearing in Louisa in May and at the Public Service Commission hearing earlier this month.

“What is even more surprising is that Kentucky Power will file the rate case for the possible 31 percent increase before the Public Service Commission has approved the transfer of the Mitchell assets. The potential 31 percent increase equals what Kentucky Power said would cost to fit the Big Sandy with scrubbers.  That’s the reason I’ve argued that it’s in the best interests of the rate payers, our economy and jobs, to put on the scrubbers at Big Sandy, a facility we’ve built and paid for over many decades.

“That is also the reason I have said this fight is worth fighting to keep the Big Sandy Power plant open,” Adkins wrote. “Most people feel pretty good when their predictions come true. Not this time.”

Kentucky Power president and CEO Greg Pauley said the company is pursuing options which will be in the best interests of residential customers during the next 25 to 30 years.

“The filing of this case is necessary to begin recovery of costs associated with transferring the Mitchell plant assets to Kentucky Power and it is being filed in anticipation that the Public Service Commission will approve the asset transfer. The company needs to be able to collect costs associated with buying and operating the Mitchell plant at the time it assumes ownership of it,” Pauley said.

“We understand that this rate case represents a significant cost to customers, even at the anticipated rate for residential customers at 20 percent. However, it is less expensive than other options we reviewed and we have worked to keep the impact as low as possible. In fact, the memorandum of understanding before the commission in the transfer case would limit the impact of the Mitchell transfer even more,” he said.

“Environmental compliance is an expensive proposition and we have always said EPA regulations associated with the continued use of coal would come at a high cost to customers. We are trying to manage those costs as best we can,” Pauley said.

TIM PRESTON can be reached at

tpreston@dailyindependent.com or

(606) 326-2651.